It may come as no surprise that covid-19 has accelerated awareness about health insurance; more and more people are now buying a cover. For a product that’s crucial to a household’s financial health, it’s a much ignored, almost non-existent entity.
Whether it’s sheer lethargy or misplaced optimism, there are many reasons for ignoring health insurance. But with covid-19 spiraling out of control and nightmarish stories of hospital experience and inflated bills slapped all over social media, panic has goaded many to consider health insurance seriously. That’s a positive outcome and should be channelled to get more people to buy, but the insurance regulator wants to tap this new-found interest with covid-19 specific products.
The Insurance Regulatory and Development Authority of India (Irdai) wants non-life companies to mandatorily offer standard covid-19 health insurance policies that pay for covid-19 treatment. You can read about it here . It has also allowed both life and non-life companies to offer optional defined benefit plans and other short-term health insurance plans—you can read more about it here and here.
Irdai’s rationale seems to ensure more people are insured for covid-19-related medical expenses at an affordable rate, but this line of thinking has one serious flaw. It induces short-term behaviour for a long-term problem that is health. Health insurance is a long-term product that needs to be renewed year after year, and for a host of health problems or accidents lurking in the future.
A short-term covid-19 product provides answers to the visible and relatively short-term threat of the pandemic, but it does little to encourage the onboarding of people to health insurance. Insurers, too, don’t seem to be enthused about covid-19-only products for two reasons: the first being pricing and the second being short-term policyholders. While the average claim size for covid-19 is higher, claims have seen a drop since planned hospitalization reduced considerably. This, according to insurers, may improve the loss ratios temporarily but the trend could reverse badly when people having bought the stand-alone covid-19 health policy vanish next year and with them the premium bucket and hospital footfall resumes normalcy.
Pricing too will be a challenge. A health insurance expert I spoke to on pricing said, “It’s like the forest is on fire and I have to insure a house where the fire has not reached yet." He estimated the pricing of the standard covid-19 indemnity plan to be somewhere around that of Arogya Sanjeevani, the standard basic health insurance policy that is mandated to be sold by all insurers.
Given that nearly 80% of the patients are asymptomatic and increasingly many are recuperating at home, the rationale for covid-19 health indemnity plans seems a bit misplaced. However, defined benefit plans help, as they act as income supplements. The covid-19-only health indemnity products could have made sense if the underwriting criteria were different and insurers were mandated to insure persons with co-morbidities, which doesn’t appear to be the case. Given this, a comprehensive policy that covers you for all unexpected exigencies as against a policy that covers only one, the former is a clear winner.
But one question still stands. How should one think about improving health insurance coverage during a pandemic? Getting the house in order by addressing gaps in health insurance coverage is a good start. Health insurance is important, but many have had bitter experiences even before the pandemic struck. Often the bitterness is a result of faulty structures through which insurance companies and healthcare providers interact. Issues such as inflated bills, complex policy structures and delays in claims settlement have plagued health insurance policyholders even in the past, but the problems have amplified now. So instead of a new covid-19 policy, existing health policies should be made more customer-friendly so that insured patients don’t end up paying huge hospital bills out of their own pocket.
The good news is that the industry already seems to be working on a billing pattern for covid-19 treatment where costs are standardized as per location and bed capacities and inclusions—PPE kits are included—clearly spelt out. The challenge, of course, would be to get the hospitals to adhere to these rates but this is precisely why the might of the industry is far more effective than individuals pushing for clarity and standardization of costs.
But if there is a product that needs to be offered, then it shouldn’t come at the cost of a regular health plan. It needs to be an add-on. Think of how motor insurance operates, for clues. It’s a standard policy that excludes certain claims and benefits. These can be included as add-on covers by paying extra premium. The same structure could be applied to health insurance, where customized benefits targeting the covid-19 infection are available as an add-on to regular health insurance policies.
Covid-19 has taken a huge toll on governments across the globe. India is no exception and it’s understandable if the state looks up to the insurance industry for healthcare financing. This is the perfect time to set right the ecosystem in which healthcare and insurance interact instead of piling on more health policies and compounding the confusion.